Question

7.13 New Lease Standards. New lease standards become effective January 1, 2019. These standards affect the accounting for operating leases. Assume Swift Company acquires a machine with a fair value of $100,000 on January 1 of Year 1 by signing a five-year lease. Swift must make payments of $16.275 each December 31. The appropriate interest rate on the lease is 10% Assume that this lease meets the criteria for an operating lease. Compute the following amounts under (a) the lease standards in effect before January 1, 2019, and (b) the new lease standards an amortization table will be useful in solving this problem): The leased asset at December 31 of each of the first three years. The lease liability at December 31 of each of the first three years. Rent expense for each of the first three years. Interest expense for each of the first three years. Depreciation expense for each of the first three years

Answer 1

page-1 Answero Swift company acquires a machine with a fair value of $ 100,000 on January-1 of year one by signing a five year lease. * fapt value of asset to be recorded in books of lessee - = $16275x present value of annuity factor for 3years at 10% torte - $16275* 2.4869'•/+1/2:1)2+1/1.1 )3) - $ 40474 → Depseciation for each of three years = $13401$404743) - Balance sheet of asset at end of first year -$40474-$13491 = $26983 Balance asset at end of second year - $ 26983– $13491 = $ 13492 » Balance asset at the end of third year = $13492 - $13492 = $0

Page-2 * Interest expense of first year = $40474 x 10/100 = $4047 Interest expense of second year - $28246x 10/100 = $2825 > Interest expense of third year = $14796 x 10/100 = $1479 — X - your Please are give a satisfied positive with thumps up of this answer.